Press Releases

Synopsys Posts Financial Results for Second Quarter Fiscal Year 2015
Q2 2015 Financial Highlights
- Revenue: $557.2 million
- GAAP earnings per share: $0.35
- Non-GAAP earnings per share: $0.68

MOUNTAIN VIEW, Calif., May 20, 2015 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its second quarter of fiscal year 2015.

For the second quarter of fiscal year 2015, Synopsys reported revenue of $557.2 million, compared to $517.7 million for the second quarter of fiscal 2014, an increase of approximately 7.6 percent.  

"Our fiscal second quarter results were very strong, and solidify our outlook for the full year," said Aart de Geus, chairman and co-CEO of Synopsys. "We see clear momentum with our new implementation and verification products in the early stages of a multi-year customer upgrade cycle. Our entry into the software quality and security space has opened up an opportunity to drive incremental growth in both familiar and new market segments and build on Synopsys' strengths."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the second quarter of fiscal 2015 was $55.6 million, or $0.35 per share, compared to $63.3 million, or $0.40 per share, for the second quarter of fiscal 2014.

Non-GAAP Results

On a non-GAAP basis, net income for the second quarter of fiscal 2015 was $107.6 million, or $0.68 per share, compared to non-GAAP net income of $101.7 million, or $0.65 per share, for the second quarter of fiscal 2014.  Reconciliation between GAAP and non-GAAP results is provided at the end of this press release. 

Financial Targets

Synopsys also provided its financial targets for the third quarter and full fiscal year 2015.  These targets do not include any impact of future acquisition-related activities or costs that may be incurred in fiscal year 2015. These targets constitute forward-looking statements and are based on current expectations.  For a discussion of factors that could cause actual results to differ materially from these targets, see "Forward-Looking Statements" below.

Third Quarter of Fiscal Year 2015 Targets:

  • Revenue: $550 million - $560 million
  • GAAP expenses: $481 million - $501 million
  • Non-GAAP expenses: $430 million - $440 million
  • Other income and expense: $0 - $2 million
  • Tax rate applied in non-GAAP net income calculations: 21 - 22 percent
  • Fully diluted outstanding shares: 155 million - 159 million
  • GAAP earnings per share: $0.23 - $0.30
  • Non-GAAP earnings per share: $0.58 - $0.60

Full Fiscal Year 2015 Targets:

  • Revenue: $2.210 billion - $2.235 billion
  • Other income and expense: $6 million - $10 million
  • Tax rate applied in non-GAAP net income calculations: 19 - 20 percent
  • Fully diluted outstanding shares: 155 million - 159 million
  • GAAP earnings per share: $1.39 - $1.49
  • Non-GAAP earnings per share: $2.76 - $2.81
  • Cash flow from operations: approximately $450 million

GAAP Reconciliation

Synopsys continues to provide all information required in accordance with GAAP, but believes evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures. Accordingly, Synopsys presents non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Synopsys' operating results in a manner that focuses on what Synopsys believes to be its ongoing business operations and what Synopsys uses to evaluate its ongoing operations and for internal planning and forecasting purposes. Synopsys' management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Synopsys' management believes it is useful for itself and investors to review, as applicable, both GAAP information that includes: (i) the amortization of acquired intangible assets, (ii) the impact of stock compensation, (iii) acquisition-related costs, (iv) other significant items, including restructuring charges and certain accruals for legal and tax matters, and (v) the income tax effect of non-GAAP pre-tax adjustments as well as unusual or infrequent tax adjustments; and the non-GAAP measures that exclude such information in order to assess the performance of Synopsys' business and for planning and forecasting in subsequent periods. Whenever Synopsys uses a non-GAAP financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed below.

Reconciliation of Second Quarter Fiscal Year 2015 Results

The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP net income and earnings per share for the periods indicated below.

GAAP to Non-GAAP Reconciliation of Second Quarter Fiscal Year 2015 Results

(unaudited and in thousands, except per share amounts)

 
 

Three Months Ended

 

Six Months Ended

 

April 30,

 

April 30,

 

2015

 

2014

 

2015

 

2014

GAAP net income

$   55,596

 

$   63,317

 

$ 120,785

 

$ 131,013

Adjustments:

             

Amortization of intangible assets

32,048

 

32,050

 

64,356

 

60,181

Stock compensation

20,283

 

18,824

 

40,864

 

36,941

Acquisition-related costs

3,472

 

4,374

 

4,184

 

5,449

Restructuring charges

-

 

-

 

15,336

 

-

Legal and tax matters

-

 

(2,040)

 

(1,519)

 

(12,307)

Tax adjustments

(3,840)

 

(14,830)

 

(10,776)

 

(26,495)

Non-GAAP net income 

$ 107,559

 

$ 101,695

 

$ 233,230

 

$ 194,782

               
               
               
 

Three Months Ended

 

Six Months Ended

 

April 30,

 

April 30,

 

2015

 

2014

 

2015

 

2014

GAAP net income per share

$       0.35

 

$       0.40

 

$       0.77

 

$       0.83

Adjustments:

             

Amortization of intangible assets

0.20

 

0.20

 

0.41

 

0.38

Stock compensation

0.13

 

0.12

 

0.26

 

0.24

Acquisition-related costs

0.02

 

0.03

 

0.03

 

0.04

Restructuring charges

-

 

-

 

0.10

 

-

Legal and tax matters

-

 

(0.01)

 

(0.01)

 

(0.08)

Tax adjustments

(0.02)

 

(0.09)

 

(0.08)

 

(0.17)

Non-GAAP net income per share

$       0.68

 

$       0.65

 

$       1.48

 

$       1.24

               

Shares used in calculation

157,483

 

157,082

 

157,409

 

156,986

 

 

Reconciliation of Target Non-GAAP Operating Results

The following tables reconcile the specific items excluded from GAAP in the calculation of target non-GAAP operating results for the periods indicated below.

GAAP to Non-GAAP Reconciliation of Third Quarter Fiscal Year 2015 Targets

(in thousands, except per share amounts)

       
 

 Range for Three Months 

 

Ending July 31, 2015 (1)

 

Low

 

High

Target GAAP expenses

$   481,000

 

$   501,000

Adjustments:

     

      Estimated impact of amortization of intangible assets

(31,000)

 

(36,000)

      Estimated impact of stock compensation

(20,000)

 

(25,000)

Target non-GAAP expenses

$   430,000

 

$   440,000

       
       
 

Range for Three Months

 

Ending July 31, 2015 (1)

 

Low

 

High

Target GAAP earnings per share

$         0.23

 

$         0.30

Adjustments:

     

Estimated impact of amortization of intangible assets

0.23

 

0.20

Estimated impact of stock compensation

0.16

 

0.13

Estimated impact of tax adjustments

(0.04)

 

(0.03)

Target non-GAAP earnings per share

$         0.58

 

$         0.60

       

Shares used in non-GAAP calculation (midpoint of target range)

157,000

 

157,000

       
       

GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2015 Targets

       
 

Range for Fiscal Year

 

Ending October 31, 2015 (1)

 

Low

 

High

Target GAAP earnings per share

$         1.39

 

$         1.49

Adjustments:

     

Estimated impact of amortization of intangible assets

0.85

 

0.80

Estimated impact of stock compensation

0.59

 

0.54

Acquisition-related costs

0.03

 

0.03

Restructuring charges

0.10

 

0.10

Legal and tax matters

(0.01)

 

(0.01)

Estimated net non-GAAP tax adjustments

(0.19)

 

(0.14)

Target non-GAAP earnings per share

$         2.76

 

$         2.81

       

Shares used in non-GAAP calculation (midpoint of target range)

157,000

 

157,000

 

(1) Synopsys' third quarter and fiscal year end on August 1, 2015 and October 31, 2015, respectively. 

 

 

Earnings Call Open to Investors

Synopsys will hold a conference call for financial analysts and investors today at 2:00 p.m. Pacific Time.   A live webcast of the call will be available at Synopsys' corporate website at www.synopsys.com.  A recording of the call will be available by calling +1-800-475-6701 (+1-320-365-3844 for international callers), access code 359327, beginning at 4:00 p.m. Pacific Time today.  A webcast replay will also be available on the website from approximately 4:30 p.m. Pacific Time today through the time Synopsys announces its results for the third fiscal quarter in August 2015.  Synopsys will post copies of the prepared remarks of Aart de Geus, chairman and co-chief executive officer, and Trac Pham, chief financial officer, on its website following the call.  In addition, Synopsys makes additional information available in a financial supplement and corporate overview presentation, also posted on the corporate website.

Effectiveness of Information

The targets included in this release, the statements made during the earnings conference call and the information contained in the financial supplement and corporate overview presentation (available in the Investor Relations section of Synopsys' website at www.synopsys.com) represent Synopsys' expectations and beliefs as of the date of this release only.  Although this press release, copies of the prepared remarks of the co-chief executive officer and chief financial officer made during the call, the financial supplement, and corporate overview presentation will remain available on Synopsys' website through the date of the third quarter fiscal year 2015 earnings call in August 2015, their continued availability through such date does not mean that Synopsys is reaffirming or confirming their continued validity.  Synopsys does not currently intend to report on its progress during the third quarter of fiscal year 2015 or comment to analysts or investors on, or otherwise update, the targets given in this earnings release.

Availability of Final Financial Statements

Synopsys will include final financial statements for the second quarter fiscal 2015 in its quarterly report on Form 10-Q to be filed by June 11, 2015.

About Synopsys

Synopsys, Inc. (Nasdaq:SNPS) is the Silicon to Software™ partner for innovative companies developing the electronic products and software applications we rely on every day. As the world's 15th largest software company, Synopsys has a long history of being a global leader in electronic design automation (EDA) and semiconductor IP, and is also a leader in software quality and security testing with its Coverity® solutions. Whether you're a system-on-chip (SoC) designer creating advanced semiconductors, or a software developer writing applications that require the highest quality and security, Synopsys has the solutions needed to deliver innovative, high-quality, secure products. Learn more at www.synopsys.com.  

Forward-Looking Statements

This press release and our upcoming earnings results conference call contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934.  Any statements that are not statements of historical fact may be deemed to be forward-looking statements.  Forward-looking statements include but are not limited to: sections of this press release entitled "Financial Targets" and "Reconciliation of Target Non-GAAP Operating Results"; and statements regarding Synopsys' business, acquisitions (including the expected closing of our pending acquisition of Codenomicon OY), products, technologies, business model, new markets, customer demand for our technology, and projected financial results and business objectives.  These statements involve known and unknown risks, uncertainties and other factors that could cause our actual results, time frames or achievements to differ materially from those expressed or implied in our forward-looking statements.  Accordingly, we caution stockholders and prospective investors not to place undue reliance on these statements.  Such risks, uncertainties and factors include, but are not limited to:

  • continued uncertainty in the global economy and its potential impact on the semiconductor and electronics industries;
  • uncertainty in the growth of the semiconductor and electronics industry, and consolidation among our customers;
  • increased competition in the market for Synopsys' products and services including through consolidation in the industry;
  • changes in demand for Synopsys' products due to fluctuations in demand for its customers' products;
  • Synopsys' ability to realize the potential financial or strategic benefits of acquisitions it completes, including its acquisition of Coverity, Inc., and challenges in entering new markets in which Synopsys is not experienced and in the integration of the products and operations of acquired companies or assets into Synopsys' products and operations, including possible delays in customer orders, potential loss of customers, key employees, partners or vendors, customer demand and support obligations for product offerings, and disruption of ongoing business operations and diversion of management attention;
  • Synopsys' ability to consummate the pending acquisition of Codenomicon OY in a timely manner or at all, including the satisfaction of the conditions precedent to consummation of the acquisition;
  • adverse changes in the relationships between Synopsys and key participants in the complex semiconductor ecosystem, including major foundries and intellectual property providers;
  • litigation;
  • lower-than-anticipated new IC design starts;
  • lower-than-anticipated purchases or delays in purchases of products or consulting services by Synopsys' customers, including delays in the renewal, or non-renewal, of Synopsys' license arrangements with major customers;
  • changes in accounting principles or standards or in the way they are applied;
  • changes in the mix of time-based licenses and upfront licenses;
  • variability in the timing of revenue recognition due to factors such as payment terms and the timing and value of contract renewals and professional services projects;
  • lower-than-expected orders; and
  • failure of customers to pay license fees as scheduled.

In addition, Synopsys' actual expenses, earnings per share and tax rate on a GAAP and non-GAAP basis for the fiscal quarter ending July 31, 2015; actual expenses, earnings per share, tax rate, and other projections on a GAAP and non-GAAP basis for fiscal year 2015; and cash flow from operations on a GAAP basis for fiscal year 2015 could differ materially from the targets stated under "Financial Targets" above for a number of reasons, including, but not limited to, (i) integration and other acquisition-related costs, (ii) application of the actual consolidated GAAP and non-GAAP tax rates for such periods, or judgment by management, based upon the status of pending audits and settlements, to increase or decrease an income tax asset or liability, (iii) a determination by Synopsys that any portion of its goodwill or intangible assets has become impaired, (iv) changes in the anticipated amount of employee stock-based compensation expense recognized in Synopsys' financial statements, (v) actual change in the fair value of Synopsys' non-qualified deferred compensation plan obligations, (vi) increases or decreases to estimated capital expenditures, (vii) changes driven by new accounting rules, regulations, interpretations or guidance, (viii) fluctuations in foreign currency exchange rates, (ix) litigation, (x) general economic conditions,  and (xi) other risks as detailed in Synopsys' SEC filings, including those described in the "Risk Factors" section in its Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2015. Furthermore, Synopsys' actual tax rates applied to income for the third quarter and fiscal year 2015 could differ from the targets given in this press release as a result of a number of factors, including the actual geographic mix of revenue during the quarter and year, and actions by the government. Finally, Synopsys' targets for outstanding shares in the third quarter and fiscal year 2015 could differ from the targets given in this press release as a result of higher than expected employee stock plan issuances or stock option exercises, acquisitions, and the extent of Synopsys' stock repurchase activity.

Synopsys is under no obligation to (and expressly disclaims any such obligation to) update or alter any of the forward-looking statements made in this earnings release, the conference call, the financial supplement, or the corporate overview presentation, whether as a result of new information, future events or otherwise, unless otherwise required by law.

SYNOPSYS, INC.

Unaudited Consolidated Statements of Operations (1)

(in thousands, except per share amounts)

               
               
 

Three Months Ended 

 

Six Months Ended

 

  April 30,

 

   April 30,

 

2015

 

2014

 

2015

 

2014

Revenue:

             

  Time-based license

$   447,844

 

$   424,185

 

$    878,870

 

$   824,331

  Upfront license

44,313

 

36,297

 

90,793

 

70,269

  Maintenance and service

65,047

 

57,215

 

129,584

 

102,048

      Total revenue

557,204

 

517,697

 

1,099,247

 

996,648

Cost of revenue:

             

  License

70,350

 

67,302

 

141,134

 

130,127

  Maintenance and service

29,010

 

21,109

 

56,993

 

41,380

  Amortization of intangible assets

25,612

 

25,674

 

51,478

 

48,427

     Total cost of revenue

124,972

 

114,085

 

249,605

 

219,934

Gross margin

432,232

 

403,612

 

849,642

 

776,714

Operating expenses:

             

  Research and development

188,315

 

178,043

 

369,925

 

345,586

  Sales and marketing

120,579

 

114,784

 

226,748

 

220,576

  General and administrative

40,975

 

40,575

 

77,329

 

74,808

  Amortization of intangible assets 

6,436

 

6,376

 

12,878

 

11,754

  Restructuring charges

-

 

-

 

15,336

 

-

     Total operating expenses

356,305

 

339,778

 

702,216

 

652,724

Operating income

75,927

 

63,834

 

147,426

 

123,990

Other income (expense), net

7,957

 

4,225

 

13,073

 

15,253

Income before income taxes

83,884

 

68,059

 

160,499

 

139,243

Provision (benefit) for income taxes

28,288

 

4,742

 

39,714

 

8,230

Net income

$     55,596

 

$     63,317

 

$    120,785

 

$   131,013

               

Net income per share:

             

  Basic

$         0.36

 

$         0.41

 

$          0.78

 

$         0.85

  Diluted

$         0.35

 

$         0.40

 

$          0.77

 

$         0.83

               

Shares used in computing per share amounts:

             

  Basic

154,515

 

154,572

 

154,486

 

154,319

  Diluted

157,483

 

157,082

 

157,409

 

156,986

 

(1)  Synopsys' second quarter for fiscal year 2015 and 2014 ended on May 2, 2015 and May 3, 2014, respectively. For presentation purposes, we refer to closest calendar month end.

 

 

SYNOPSYS, INC.

Unaudited Consolidated Balance Sheets (1)

(in thousands, except par value amounts)

         
   

April 30, 2015

 

October 31, 2014

ASSETS:

       

Current assets:

       

  Cash and cash equivalents

 

$          868,845

 

$                985,762

  Short-term investments

 

136,579

 

-

          Total cash, cash equivalents and short-term investments

 

1,005,424

 

985,762

  Accounts receivable, net

 

338,407

 

326,727

  Deferred income taxes

 

81,303

 

111,449

  Income taxes receivable and prepaid taxes

 

33,004

 

26,496

  Prepaid and other current assets

 

86,837

 

54,301

          Total current assets

 

1,544,975

 

1,504,735

Property and equipment, net

 

258,199

 

249,098

Goodwill

 

2,251,845

 

2,255,708

Intangible assets, net

 

302,656

 

365,030

Long-term prepaid taxes

 

3,789

 

17,645

Long-term deferred income taxes

 

210,373

 

208,156

Other long-term assets

 

184,330

 

175,127

           Total assets

 

$       4,756,167

 

$             4,775,499

         

LIABILITIES AND STOCKHOLDERS' EQUITY:

       

Current liabilities:

       

  Accounts payable and accrued liabilities

 

$          301,101

 

$                397,113

  Accrued income taxes

 

6,361

 

31,404

  Deferred revenue

 

827,576

 

928,242

  Short-term debt

 

190,000

 

30,000

           Total current liabilities

 

1,325,038

 

1,386,759

Long-term accrued income taxes

 

39,796

 

50,952

Long-term deferred revenue

 

98,806

 

77,646

Long-term debt

 

30,000

 

45,000

Other long-term liabilities

 

197,529

 

158,972

           Total liabilities

 

1,691,169

 

1,719,329

Stockholders' equity:

       

  Preferred stock, $0.01 par value: 2,000 shares authorized; none outstanding

 

-

 

-

  Common stock, $0.01 par value: 400,000 shares authorized; 155,054 and 155,965 shares outstanding, respectively

 

 

1,551

 

 

1,560

  Capital in excess of par value

 

1,603,397

 

1,614,603

  Retained earnings

 

1,643,207

 

1,551,592

  Treasury stock, at cost: 2,210 and 1,299 shares, respectively

 

(94,627)

 

(49,496)

  Accumulated other comprehensive loss 

 

(88,530)

 

(62,089)

           Total stockholders' equity

 

3,064,998

 

3,056,170

           Total liabilities and stockholders' equity

 

$       4,756,167

 

$             4,775,499

 

(1)  Synopsys' second quarter for fiscal year 2015 and fiscal year 2014 ended on May 2, 2015 and November 1, 2014, respectively. For presentation purposes, we refer to the closest calendar month end.

 

  

SYNOPSYS, INC.

Unaudited Consolidated Statements of Cash Flows (1)

(in thousands)

       
 

 Six Months Ended April 30, 

 

2015

 

2014

CASH FLOWS FROM OPERATING ACTIVITIES:

     

Net income

$ 120,785

 

$  131,013

Adjustments to reconcile net income to net cash provided by operating activities:

     

Amortization and depreciation

102,051

 

91,585

Stock compensation

40,864

 

36,941

Allowance for doubtful accounts 

600

 

(250)

(Gain) loss on sale of investments

(17)

 

(6,529)

Deferred income taxes

27,636

 

9,266

Net changes in operating assets and liabilities, net of acquired assets and liabilities:

     

Accounts receivable

(16,491)

 

(59,577)

Prepaid and other current assets

(34,584)

 

(4,557)

Other long-term assets

(13,359)

 

(13,756)

Accounts payable and accrued liabilities

(62,142)

 

(83,135)

Income taxes

(27,077)

 

(15,021)

Deferred revenue

(70,530)

 

(48,069)

Net cash provided by operating activities

67,736

 

37,911

       

CASH FLOWS FROM INVESTING ACTIVITIES:

     

Proceeds from sales and maturities of short-term investments

17,721

 

-

Purchases of short-term investments

(154,744)

 

-

Proceeds from sales of long-term investments

-

 

7,304

Purchases of property and equipment

(43,979)

 

(29,901)

Cash paid for acquisitions and intangible assets, net of cash acquired

(2,303)

 

(367,965)

Capitalization of software development costs

(1,865)

 

(1,875)

Other

900

 

-

Net cash used in investing activities

(184,270)

 

(392,437)

       

CASH FLOWS FROM FINANCING ACTIVITIES:

     

Proceeds from credit facility

250,000

 

200,000

Repayment of debt

(105,424)

 

(15,497)

Issuances of common stock

54,006

 

53,326

Purchase of equity forward contract

(36,000)

 

-

Purchases of treasury stock

(144,000)

 

(79,747)

Other

(116)

 

(706)

Net cash provided by financing activities

18,466

 

157,376

Effect of exchange rate changes on cash and cash equivalents

(18,849)

 

(3,658)

Net change in cash and cash equivalents

(116,917)

 

(200,808)

Cash and cash equivalents, beginning of the year

985,762

 

1,022,441

Cash and cash equivalents, end of the period

$ 868,845

 

$  821,633

 

(1)  Synopsys' second quarter for fiscal year 2015 and 2014 ended on May 2, 2015 and May 3, 2014, respectively. For presentation purposes, we refer to the closest calendar month end.

 

 

INVESTOR CONTACT:
Lisa L. Ewbank
Synopsys, Inc.
650-584-1901
Synopsys-ir@synopsys.com

EDITORIAL CONTACT:
Yvette Huygen
Synopsys, Inc.
650-584-4547
yvetteh@synopsys.com

 

SOURCE Synopsys, Inc.